Remittances from Mideast likely to remain resilient

By Katherine K. Chan, Reporter

FILIPINOS WORKING in the Middle East are likely to send more money home in the coming months to help their families cope with faster inflation driven by the energy crisis, while also taking advantage of the peso’s weakness to maximize the value of their remittances, analysts said.

“Overall, analysts expect remittances to remain fairly resilient, unless the war severely disrupts labor markets or triggers mass repatriations,” Ser Percival K. Peña-Reyes, a senior research fellow at Ateneo Center for Economic Research and Development, told BusinessWorld in an e-mail.

“Historically, OFW (overseas Filipino worker) remittances have proven durable during geopolitical and economic shocks because Filipino workers prioritize supporting families during uncertain periods,” he added.

Cash remittances from the Middle East bucked projections after growing nearly 20% to $565.91 million in March from $471.836 million in February.

The Manila-based Asian Development Bank and international credit rater Moody’s Ratings earlier warned that the Philippines could see a drop in remittance flows if the war in the region drags on.

However, Bangko Sentral ng Pilipinas (BSP) data also showed that overall cash remittances rose by 2.3% to $2.874 billion in March, with 19.69% coming from the Middle East.

Analysts said this may also be due to steady employment despite the conflict and the strong United States dollar and other Middle East currencies helping families of OFWs in the country receive higher remittance value.

“OFWs receiving hazard pay in the region may have also been able to send more money back home. The need for remittances likely outweighed the losses due to the Middle East war,” Marco Antonio C. Agonia, an economist at the University of Asia and the Pacific (UA&P), told BusinessWorld via e-mail.

Mr. Agonia also noted that OFWs typically take advantage of a weaker peso, as it means higher gains from dollar conversion.

The peso ended March weaker as it closed at P60.748 against the greenback on March 31, down by P3.083 or 5.35% from its P57.665 finish on Feb. 27, Bankers Association of the Philippines data showed.

Still, OFW repatriation from the region may have slightly dampened remittance growth during the first month of the war.

“(R)epatriation due to regional disruptions may have resulted in slower remittance growth. Compared to last year, the February-March flow was a tad slower,” Mr. Agonia said.

Based on government data, over 2.4 million Filipino migrants and workers are based in the Middle East.

The Department of Migrant Workers reported that as of May 22, a total of 10,012 OFWs and dependents returned to the Philippines from the Middle East since the US-Israel war on Iran broke out around three months ago.

However, the burden of higher commodity prices offset such drags, as Mr. Peña-Reyes noted that the faster March inflation print likely prompted Middle East-based OFWs to frontload their remittances.

“Inflation raises the cost of essentials, such as food, transport, electricity, and housing, which increases the financial needs of families relying on remittances,” he said. “When prices rise sharply, OFWs often respond by remitting additional funds to help relatives maintain their daily expenses and purchasing power.”

In March, consumer prices picked up faster than expected, with costlier fuel, electricity and food driving the headline print to its fastest pace in about two years at 4.1%.

Inflation continued to accelerate, hitting an over three-year high of 7.2% in April as still high oil prices continued to push up prices of basic commodities.

As commodity prices may remain elevated in the coming months, analysts said OFWs in the Middle East might keep sending more money home to support their families’ needs.

“We need to see if military escalation will continue in the region, which will more significantly affect remittance flows,” UA&P’s Mr. Agonia said. “Even then, a higher inflation outlook will likely result in households requiring more money sent back home.”

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., also attributed the larger remittance inflows from the region to OFWs’ readiness to help their families during a crisis, which could keep remittance levels strong even if the conflict prolongs.

Asked if remittances will remain high in the months ahead, he said: “Yes, most of the time during a crisis, they send extra (money home). That’s why they’re called heroes.”

Economic managers and other analysts expect inflation to stay elevated until yearend as the oil crisis has begun to feed into the prices of most basic commodities such as food, transport and utilities.

The central bank sees inflation hovering above 5% for most of the year to average 6.3% in 2026.

Meanwhile, the BSP’s latest balance of payments projections show that it expects remittances to expand slower by 3% to $36.7 billion this year from the 3.3% growth to $35.6 billion in 2025.